5 Factors To Account For When Purchasing A Plane For Your Business

Posted by on 06/12/2014

Even though the global economy seems to be picking up – it's true, at a slow pace – numerous CEOs still think it's a bit tone-deaf to be flying around in their own private jets nowadays. Without denying that purchasing an aircraft for your company is a huge investment, the truth is that the convenience of a private charter can save you a lot of time and ultimately, help increase the revenues. The key to enjoying the two aforementioned benefits however, resides in rationalizing your decision.

First off, make a cost-benefit analysis

Granted, a close look over the jet market reveals that the prices for jets is down, meaning that today you could purchase an aircraft for 20% to 50% less than a few years ago. While they're more affordable nowadays, let's not forget that a plane's price is still a few millions. To justify the expense and determine whether it's a good investment, you will have to do a cost-benefit analysis. According to aviation experts, the expense is fully justified in situations when you and your team fly around 350 to 400 hours per year.

Hidden costs of owning a private plane

In addition to the initial price, you will also have to account for various hidden costs associated with owning a plane. From insurance, maintenance and fuel to catering and pilots, you must be prepared to allocate between $100,000 and $200,000 of your budget per year for the aircraft. Furthermore, you should also account for unpredictable repairs, which could force you to spend around $50,000 on a single part. Lastly, you will have to discuss this issue with your PR team, as in general the public frowns upon the buying and using of a private jet.

How to buy a plane

In case your company flies at least 350 hours annually and your budget allows you to cover the initial and hidden costs, you should purchase a company airplane. First and foremost, you will have to determine the type of plane that suits your requirements. If your operations are mostly national, you could opt for a smaller jet, one that is able to comfortably accommodate up to 8 passengers and that can travel 2,000 miles on average. Alternatively, if you need to travel abroad, then you can purchase a large executive charter that can carry up to 12 passengers over a distance of more than 4,000 miles.

Regardless of the plane you selected, here are the next steps to follow when investing in a jet:

• Take it for a test drive

Aviation experts recommend test-driving the aircraft before purchasing it. If you're a frequent traveller, then you have already been a passenger on most business jets and hence, you know which cabins suit your needs and preference. In general, reputable companies arrange demo flights for interested buyers who are willing to pay an escrow and the costs of the flight.

• Get it inspected by a reliable third party

Given the costs of an aircraft, it's only logical to make sure it's in flying condition and worth the asking price. By getting the plane inspected by a third party, you can uncover several safety issues, especially if you plan to purchase a used jet. Moreover, it allows you to identify possible big-ticket maintenance problems before sealing the deal and save you millions of dollars.

• Find the adequate financing

If you like the aircraft you tested and you have determined it's in good condition, then it's time to look for financing. Take note that loans for this purpose have terms between 3 and 5 years, and come with an amortization option for up to 20 years for new models and 12 years for older planes, built before the 1980s. Don't forget to calculate the standard legal fees that apply for this purchase.

• Examine the purchase with a lawyer

Even though you have obtained the financing for your purchase, it's highly advisable to go over the contract and the taxes associated with the investment with a qualified lawyer. Despite the popular belief, purchasing a plane is not like buying a car and you simply can't just go to the dealership and pick it up. This type of investment is a much more involved process that entails accounting for tax planning, insurance and rules of the sky.

• Decide on the features you want

After your lawyer gives you the green light, the next step implies deciding on the features you want to install on the plane. Based on the activities you intend to perform while on the plane, the options are limitless and can include everything from medical suites and full dining rooms to mini movie theatres and whirlpool hot tubs.

• Hire a consultant to manage your investment

Once you purchase your aircraft, you will have to get it into the air and make sure it stays there. If you're the CEO of big company, that entails designating a management team to look after the plane. Alternatively, you can consider working with a third party consultant, a professionals specializing in managing large investments such as private jets.